Is PayPal Safe and Secure?

Last Updated: April 4, 2016 - 2:35 EDT

How safe is PayPal?

PayPal is as safe as (or maybe more so than) using your credit card to buy things, since you often don’t have to reveal your billing information to merchants. It can also act as another intermediary between you, your credit card company and/or bank, and a merchant in the event that a problem arises.

PayPal has had some problems with scams and fraud in the past. However, most of these problems were largely the result of inadequate security protections (which have since been mostly fixed). Most issues with PayPal nowadays are the result of dishonest merchants abusing PayPal, as opposed to inherent flaws in how PayPal works.

5 tips for how to avoid PayPal scams

Avoiding PayPal scams is largely a matter of using common sense and your intuition to identify potentially fraudulent merchants before your money ever reaches them. In other words, many general tips that apply to shopping safely online can also be used to avoid PayPal scams.

1. Before you buy anything online, research it thoroughly.

One of the most basic ways of avoiding scams — or at least buyer’s remorse — while shopping online is to read all information available to you about a product, and read it carefully. Read what the seller’s reputation is like. See what other people who have bought from this merchant have said about the product that you are looking to buy, or the merchant’s other products. Most importantly, examine the merchant’s returns and refunds policy, so you know what (you are able) to do if you have a problem with the item that you buy.

2. Pay for online items on the websites where they’re listed, and nowhere else.

When you’re shopping on a popular online marketplace where users can sell their own items, there is a rare chance that a merchant may send you an email or message asking you to go to a different website and pay them through PayPal from there. This is a bad idea for a couple of reasons. First of all, this is usually against the online marketplace’s rules, as it cheats them out of their seller fees. Second, you’re potentially losing the protection of completing the transaction in a secure environment, where the online marketplace has a record of the sale and can track down and deal with a dishonest seller if something goes wrong. And finally, the website that the seller leads you to may not even be for accepting payment, and may instead be for using malware to attack your computer and possibly steal your personal and/or financial information. So if you get a request from a seller on an online marketplace to take your payment off the website, ignore them and find someone else to buy from.

3. Only make direct money transfers through PayPal to people whom you know and trust.

When you pay for a subscription or item on a website using PayPal (or your credit card), you’re usually pretty safe. This is because the website that you’re buying on acts as an intermediary. They get a copy of the transaction record, so if someone tries to scam you, the website can track them down and punish them for breaking the website’s rules (and your trust).

On the other hand, direct money transfers make it difficult for either you or the company facilitating the transfer to trace the money (and, consequently, get it back) once it’s in the recipient’s hands. This is why they are one of the most commonly requested payment methods by scammers. Therefore, you should only use PayPal to directly transfer money to people whom you have personally met and gotten to know. If a business or business partner that you aren’t all that familiar with asks you to transfer money to them over PayPal, consider asking them if there is a more secure way that they will accept payment, such as with a credit card or in person with cash or a cheque.

4. Know how to spot fake emails supposedly from PayPal.

You may occasionally receive emails from PayPal when activities happen with your account, such as making a purchase with PayPal or money is transferred to your PayPal account. However, there is a chance that you may also receive emails from scammers claiming to be PayPal. Though an email may look authentic, there are two giveaways that will tell you that it’s not from PayPal.

First, it doesn’t address you by your full name or company title (i.e. it offers a generic greeting such as “Hello user” or “Dear PayPal customer”). Second, it will ask you directly for money or sensitive information about your bank account, credit card, social security number, etc., or direct you to a website where you are to input this information. Official emails from PayPal will NEVER ask you to do this. Additional clues for fake emails claiming to be from legitimate companies can be found in our lesson on phishing scams.

If you receive a fake email claiming to be from PayPal, forward it to spoof@paypal.com (without changing the subject line or turning it into an attachment). This helps PayPal warn its customers about being caught by any similar emails. Then, immediately delete the original email.

5. If all else fails, file a complaint with PayPal customer service.

If you think that you’ve been scammed, try getting in contact with PayPal customer service. Our How to Contact PayPal Customer Service tutorial will show you how to do this. You can also open a dispute (and potentially file a claim) against a seller whom you paid through PayPal, either on eBay or at another website or establishment that accepts PayPal as a payment method. You can read more about how to do so here. Hopefully, PayPal will work with you to recover your money or otherwise make things right.

Alright! Now that you know how to stay safe when using PayPal, let’s take a look at some of the costs that may be associated with using it in our next tutorial.